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Consider the Following Vector Error Correction (VECM) Model Δ\Delta Yt = Yt-5 + 1

Question 8

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Consider the following vector error correction (VECM) model: Δ\Delta yt = Consider the following vector error correction (VECM) model: \Delta y<sub>t</sub> = y<sub>t-</sub><sub>5</sub> + <sub>1</sub> \Delta y<sub>t-</sub><sub>1</sub> + <sub>2</sub> \Delta y<sub>t-</sub><sub>2</sub> + <sub>3</sub> \Delta y<sub>t-</sub><sub>3</sub> + <sub>4</sub> \Delta y<sub>t-</sub><sub>4</sub> + u<sub>t</sub> Where y<sub>t</sub> is a k* 1 vector of variables, and u<sub>t</sub> is a k* 1 vector of disturbances. Which of the following statements is true of the VECM? A) Johansen's test for cointegration centres on the rank of the matrix <sub>1</sub> B) If the variables y<sub>t</sub> are cointegrated, will be of full rank C) If the rank of is zero, the variables are cointegrated D) Provided that all of the series in y are nonstationary, the rank of can be at most k-1. yt-5 + Consider the following vector error correction (VECM) model: \Delta y<sub>t</sub> = y<sub>t-</sub><sub>5</sub> + <sub>1</sub> \Delta y<sub>t-</sub><sub>1</sub> + <sub>2</sub> \Delta y<sub>t-</sub><sub>2</sub> + <sub>3</sub> \Delta y<sub>t-</sub><sub>3</sub> + <sub>4</sub> \Delta y<sub>t-</sub><sub>4</sub> + u<sub>t</sub> Where y<sub>t</sub> is a k* 1 vector of variables, and u<sub>t</sub> is a k* 1 vector of disturbances. Which of the following statements is true of the VECM? A) Johansen's test for cointegration centres on the rank of the matrix <sub>1</sub> B) If the variables y<sub>t</sub> are cointegrated, will be of full rank C) If the rank of is zero, the variables are cointegrated D) Provided that all of the series in y are nonstationary, the rank of can be at most k-1. 1 Δ\Delta yt-1 + 11efcd90_39fd_be4b_b057_81d80004b874_TB7071_002 Δ\Delta yt-2 + 11efcd90_39fd_be4b_b057_81d80004b874_TB7071_003 Δ\Delta yt-3 + 11efcd90_39fd_be4b_b057_81d80004b874_TB7071_004 Δ\Delta yt-4 + ut
Where yt is a k* 1 vector of variables, and ut is a k* 1 vector of disturbances.
Which of the following statements is true of the VECM?


A) Johansen's test for cointegration centres on the rank of the matrix 11efcd90_39fd_be4b_b057_81d80004b874_TB7071_001
B) If the variables yt are cointegrated, 11efcd90_16b9_935a_b057_bb82007e6039_TB7071_00 will be of full rank
C) If the rank of 11efcd90_16b9_935a_b057_bb82007e6039_TB7071_00 is zero, the variables are cointegrated
D) Provided that all of the series in y are nonstationary, the rank of 11efcd90_16b9_935a_b057_bb82007e6039_TB7071_00 can be at most k-1.

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